We started a small bakery where we focus on "from scratch" using high quality ingredients (fresh ground imported nutmeg, etc . . .).
We bake in a rented kitchen that belongs to an existing high end hand made chocolate store . . . which does not get a lot of traffic (most of their sales are corporate and shipped).
I know that it will take some time for people to know we are here . . .but what can I do to help cut costs of product wastes. I feel like it is a catch 22.
I want to fill my cases with beautiful cakes, and cupcakes . . but nobody comes in the store . . so I end up throwing it out. Cakes are too expensive to throw out, so I don't have any cakes on display . . and I think that hurts us. I made a dummy cake for display, but the chocolate owner frowned on that . . not sure why, exactly.
Our cupcakes are in a cooled display case . but after two days need to be replaced . . so I take a loss there.
Cookies don't stay fresh, packaged up, for more than a day . . so I take a loss there.
We are working (on a budget) to drive customers in . . and it will happen in time . .but what can we do in the mean time?
If no one is coming into the store, you probably don't need to bake anything for display. Is it possible to reconfigure your part of the space to deemphasize or eliminate the display cases? You could also push back on the store owner about the dummy cakes. Or start keeping frozen inventory if you can make the frozen item saleable relatively quickly.
One potential tactic would be a Groupon type deal that starts on a specific day and gives you feedback on how many you have sold in advance, so you know how many items you need to make. Of course make sure the deal makes sense for you financially compared with other advertising options.
Thank you for your input. I agree 100%, however there are things to weigh out . .
If we eliminate displaying any of our products in case/shelf . . . we eliminate the opportunity to grow the retail part of the business. She just started selling fresh coffee in the store, and we are hoping to be visible as people start to adjust to the new coffee . . . and wanting a treat to go with it.
Cupcakes freeze very well, but take 2 hours to thaw.
One of my issues is this example:
A small plate with only a few cookies on it . . . looks pathetic. A plate full of cookies is eye appealing . . . but there is not enough traffic (yet) in the store to allow us to fill the plate of sellable cookies.
She has told us that for December, it is not stop in the retail store. Maybe we need to hang in there one more month taking a hit with the retail area, and if things don't turn around . . . pull out of the store and do special order only.
We looked into Groupon and I WISH we had the budget to withstand this type of promotion. But, it does not work for us. For example:
An 8" cake is $40.00
Ingredients and Packaging is $13.00, the rest of the cost is labor, overhead, etc...
Groupon forces you to do at least 50% off. . so that would force us to sell a cake for $20.00 instead of $40.00. If that was where it stopped, we would be ok . . BUT . . Groupon takes 50% of your sale . . . so in fact, we would be only making $10.00 for a $40.00 cake, and a loss of $3.00 t $5.00 per cake.
Add that up X 500 and we are in trouble.
If no one is coming into the store, you probably don't need to bake anything for display. Is it possible to reconfigure your part of the space to deemphasize or eliminate the display cases? You could also push back on the store owner about the dummy cakes. Or start keeping frozen inventory if you can make the frozen item saleable relatively quickly.
One potential tactic would be a Groupon type deal that starts on a specific day and gives you feedback on how many you have sold in advance, so you know how many items you need to make. Of course make sure the deal makes sense for you financially compared with other advertising options.
If we eliminate displaying any of our products in case/shelf . . . we eliminate the opportunity to grow the retail part of the business.
The question is, do you want to focus on the retail part of the business (customers coming in and buying a cupcake or two), or do you want to focus on larger custom orders like multi-tier cakes?
We looked into Groupon and I WISH we had the budget to withstand this type of promotion. But, it does not work for us. For example:
An 8" cake is $40.00
Ingredients and Packaging is $13.00, the rest of the cost is labor, overhead, etc...
Groupon forces you to do at least 50% off. . so that would force us to sell a cake for $20.00 instead of $40.00. If that was where it stopped, we would be ok . . BUT . . Groupon takes 50% of your sale . . . so in fact, we would be only making $10.00 for a $40.00 cake, and a loss of $3.00 t $5.00 per cake.
Add that up X 500 and we are in trouble.
You would be in trouble if your business model relied on recurring Groupon-type deals to bring in customers, but there are ways to structure a deal that works to your benefit as a one-time promotion. For example, instead of offering 50% off a cake, you could offer 50% off a less expensive product (or even a completely new SKU) like a six pack of premium cupcakes priced with a higher margin built in.
For example, let's say you introduce a premium cupcake 6 pack priced at $25 with a cost of $16 (don't forget to include labor and overhead, your true loss on the cake in your example would be far more than $3-5 each). If you sold 250 at 50% off, your revenue after paying Groupon would be $1562, with a net loss of $2438.
That sounds like a lot, but don't forget this is an advertising expense, so you have to weigh that cost against how much business would be brought in by spending $2438 on Google AdWords, radio commercials, print ads, etc. The nice thing about Groupon is that it gives you a clear picture of your acquisition cost per customer (in the cupcake example, about $10/person). The not-so-nice thing about Groupon is that the customers you attract may not be the kind of customers you're looking for.
And FYI, Google and Yelp both have deal programs similar to Groupon, I know that Yelp only takes 30% of the gross instead of 50% but I'm not sure if there are similar restrictions to Groupon.
I had this exact problem. What I did for my bakery cases was to begin to make smaller cakes and tarts. I can make 2- 7" tarts for the same food cost as the larger ones I was making. The result was great - 2 products took up more space in the case, and come to find out, most customers who were coming in for a purchase really loved the smaller sizes. in addition, I would charge $24. For an iced 8" cake, but I could charge (and get) 16. For a 6" cake - same with the tarts. Same food cost = more product = more $ and = more retail space occupied by sellable product.
I also made bars and cookies, only bringing out 5 at a time, as they sell, replenish.
Also - if you find a food pantry or non-profit shelter, you can donate your unsellable product and get tax deduction for the food cost (at least in NY) You have to keep track of the donations, but its worthwhile.
Good luck!
I had this exact problem. What I did for my bakery cases was to begin to make smaller cakes and tarts. I can make 2- 7" tarts for the same food cost as the larger ones I was making. The result was great - 2 products took up more space in the case, and come to find out, most customers who were coming in for a purchase really loved the smaller sizes. in addition, I would charge $24. For an iced 8" cake, but I could charge (and get) 16. For a 6" cake - same with the tarts. Same food cost = more product = more $ and = more retail space occupied by sellable product.
I also made bars and cookies, only bringing out 5 at a time, as they sell, replenish.
Also - if you find a food pantry or non-profit shelter, you can donate your unsellable product and get tax deduction for the food cost (at least in NY) You have to keep track of the donations, but its worthwhile.
Good luck!
I am in NY as well, and was informed that I can NOT get a deduction for donating goods, because I already get the deduction when buying ingredients to make the goods . . and you can't deduct the same thing twice . .
The person informing me, may have misunderstood my question (I called the Tax Dept) So I will have to re-look into that.
Thank you for your input. I agree 100%, however there are things to weigh out . .
If we eliminate displaying any of our products in case/shelf . . . we eliminate the opportunity to grow the retail part of the business. [quote=
[/quote]
I meant to say, I totally agree that you can not eliminate having fresh product in the bakery cases. Also, there is a factor in play when customers see an empty case, it makes them wonder how fresh your product is, how good it is. It's like going to a new restaurant and seeing few/no cars in the parking lot and you think, "wow, maybe this isn't such a good idea."
Remember, you are new and there will be waste costs involved. I would encourage you to take the holidays to give it all you got. If the owner says it's non-stop busy, you'll see the result. Bakery business tends to drop way down in January, so it's really tough to evaluate business during these months.
You are correct that you can't take both deductions...but if you throw the item away you can only deduct COGS, whereas contributing to a qualified charitable organization will let you deduct the fair market value of the item (i.e. what you would have sold it for).
http://www.irs.gov/publications/p526/ar02.html#en_US_2010_publink1000229703
I would immediately replace the cookies with pre-frozen ones. The kind you just pop in the oven. Properly stored and baked, they can last up to a week. It will start the savings and build your shelf life, yet still taste pretty good. Switch back when time, money and product cost are more aligned.
For the cakes and cupcakes, I would definitely fill up the shelf with dummy cakes and cupcakes to give presence. People are visual and they need to see what you can do. You can also make photos of your cakes and put them up and/or around the shop. Cake slices, whole cakes, etc. Something that looks appealing and appetizing. Use stock photos as great-looking photos if you don't have any.
Dummy cakes are a must and the owner needs to understand that. I can't think of any cake shop that I know of that doesn't have any dummy cakes on display.
Question, what are you doing to drive customers into your store? Do you have a big sign or banner out front? Are you offering some type of immediate discount (i.e. buy 3 cupcakes, get one free)? Standing outside handing out samples? Happy hours, etc. ?
[/quote]I am in NY as well, and was informed that I can NOT get a deduction for donating goods, because I already get the deduction when buying ingredients to make the goods . . and you can't deduct the same thing twice . .
The person informing me, may have misunderstood my question (I called the Tax Dept) So I will have to re-look into that.[/quote]
You CAN get a deduction for Cost of Goods for all donated products in NY, but you must keep good records. My accountant has done our bookkeeping/taxes this way for years.
Could you do something fun in the display case instead of just product. A stack of ribboned cake boxes, ceramic cupcakes. Do little corners of non-food items to help fill in the gaps and highlight the real items on pedastals etc. I would also push back on the dummy cakes. I assume she doesn't like the idea because if someone walked in and asked to buy it then she has to tell them it's display only. But if your dummies are over the top gorgeous, you vs put a label that says "Available for special order." which sounds better than display only
both things will cut down cost and still fill the case.
In addition to the great suggestions above, don't forget that some of the best advertising is sampling your goodies. How about instead of throwing items out as they are getting near (not past!) fresh, you cut them up and take to businesses/churches/schools/organizations in the area to try your wares. Drop off a tray with assorted items and include a brochure about who you are/what you do/where you are located, etc. and maybe even include a bunch of coupons (one per purchase, of course) to get people moving into your store?
In addition to the great suggestions above, don't forget that some of the best advertising is sampling your goodies. How about instead of throwing items out as they are getting near (not past!) fresh, you cut them up and take to businesses/churches/schools/organizations in the area to try your wares. Drop off a tray with assorted items and include a brochure about who you are/what you do/where you are located, etc. and maybe even include a bunch of coupons (one per purchase, of course) to get people moving into your store?
That's a great idea!
You can freeze your cupcakes. They take less than 15mins to thaw. If in doubt experiment!
Lots of good ideas here. Thank you!!
As for giving stuff away . . we do tons of that already. We do "surprise-bys" every week where we stop in local businesses and introduce ourselves as the new neighbor and drop off samples. This works great for special orders and that part of our business is solid.
It's the retail part that flops.
As for the member who advised me to use pre-frozen cookies (the kind you cut and bake) to save costs . . . Not On Your Life LOL!!! That goes against everything we stand for, and I would rather close shop then to use store bought frozen cookies. I do understand your reasoning . . it's just not an option that I am willing to explore.
I do, however like the idea of filling up the case with a small amount of product and some other things . . like decorated boxes and stuff . . . this would work well now, with Christmas coming.
We already freeze our cupcakes (which I HATE HATE HATE but have no choice). As is we put about two cupcakes on each plate in the display case and refill as necessary . . but retail sales are at a stand still, and even those don't sell sometimes. Our special orders are way up . . . but being inside her chocolate shop is just not profitable on the retail area . . yet.
Cookies are a nightmare . . . they don't stay fresh more than a day, they change texture in the freezer . . and nobody buys them lol. They have a life of one day and we have decided to stop having cookies on the shelf . . and instead have a "free cookie saturday" where we can urge customers to come in and try fresh out of the oven cookies on Saturdays for free. Then slowly re-emerge the cookies back on the shelf as demand may increase.
In the end, we may pull out totally from the retail side of things and focus solely on the special orders. Time will tell.
Thanks to all . . for the great replies.
As for the member who advised me to use pre-frozen cookies (the kind you cut and bake) to save costs . . . Not On Your Life LOL!!! That goes against everything we stand for, and I would rather close shop then to use store bought frozen cookies. I do understand your reasoning . . it's just not an option that I am willing to explore.
Pre-frozen does not necessarily mean store-bought. We often make scratch cookie dough ahead of time and keep it in the freezer, then bake off batches as needed.
There's nothing wrong with using the freezer to extend the shelf life of your products, in most cases freezing product has no impact on quality and can sometimes even improve the taste.
[/quote]
Pre-frozen does not necessarily mean store-bought. We often make scratch cookie dough ahead of time and keep it in the freezer, then bake off batches as needed.[/quote]
LOL... I agree! Someone once asked me about my frozen cookie dough and why mine tasted better than the stuff they bought. MINE were scratch made, frozen ,and baked as needed. Frozen is a storage method- not a source.
It's actually what I meant... sort of.
We used to make our own cookies until the time, materials and waste outweighed what I made in sales. I then found a wholesale supplier who makes and sells them in bulk, but frozen. THEY make them from scratch and all I do is pop in the oven and sell. They offer over 10 different kind, they taste great and they lasted much longer on the shelf than what I was making myself. They cost less to buy than my own product was to make, and my front desk associate can bake them as needed so I can have fresh smelling cookies throughout the day.
I don't ever consider a 'supplier' a store. IMO, there is a world of difference.
We make our cookies and cakes by scratch too. We often make large batches of cookie dough and ball them up to the size we want and freeze them. When we need cookies, we pull out what we need, put them on our stone and bake them. Within 15 min. we have fresh cookies ready to serve. Love it!
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